When someone quotes you a reverse mortgage rate, ask which rate they mean. There are at least three numbers in play, and only one of them drives how much you can borrow.
The three components
- Index: For adjustable HECMs, the underlying index is typically the Constant Maturity Treasury (CMT) rate. It moves with the market and neither you nor the lender controls it.
- Margin: The lender's fixed add-on, commonly in the 1.5%–3.0% range. This is the piece that varies between lenders and the piece you should shop.
- Mortgage insurance premium (MIP): An ongoing annual rate charged by FHA and accrued to your balance.
Your initial interest rate equals index plus margin. Your effective note rate for accrual purposes adds the ongoing MIP on top. Our live rates page publishes the current 10-Year and 1-Year CMT along with prevailing margins.
The expected rate is what sets your loan amount
Here is the part most articles skip. The rate that determines your principal limit is not the initial rate — it is the expected rate, based on the 10-Year CMT plus margin, locked at application or closing. FHA feeds that expected rate and the age of the youngest borrower into its Principal Limit Factor tables.
The practical consequence: a lower expected rate produces a higher PLF and more available proceeds. A quarter-point difference in margin can be worth tens of thousands of dollars on a high-value California home. See how the principal limit is calculated.
Fixed versus adjustable
A fixed-rate HECM locks your rate for life but forces a single lump-sum draw at closing. An adjustable HECM has a rate that resets, but unlocks the line of credit, tenure payments, and term payments — and the unused line grows at the note rate plus MIP. For most borrowers the growth feature outweighs rate certainty. Our comparison of fixed vs. adjustable HECMs works through both cases.
What to ask any lender
- What is your margin, in writing?
- What expected rate are you using for my principal limit?
- Is the rate locked at application or at closing, and for how long?
- What are the lifetime and periodic adjustment caps?
- What is my total origination fee, separate from rate?
Rates are only half the decision
A lender can advertise an attractive margin and recover it through origination charges. Always compare total net proceeds and the Total Annual Loan Cost, not a single quoted rate.
Check today's numbers on our rates dashboard, then model your own scenario in the calculator.
